Apple pays non-US income taxes of just 2 per cent

The company is likely awaiting a "repatriation tax holiday".

Apple's annual tax return (pdf), filed with the US Securities and Exchange Commission, reveals that it paid just 2 per cent tax on "foreign" (non-US) earnings in 2012.

The news, highlighted by the Sunday Times' Simon Duke, can be found on page 61 of the document, which reveals that the company owed $1,203m taxes on foreign pretax earnings of $36.8bn, and deferred payment on $490m in order to realise a tax bill of $713m this year. Even if the deferred taxes were paid in full, the company would still be paying an effective rate of just over 3 per cent.

International sales accounted for 61 per cent of Apple's business in the last year, and so many are likely to cry foul at the low proportion of taxes which it pays in the areas in which it carries out the majority of its business.

Apple, like many multinational corporations, employs many strategies to legally lower its tax bill. The company bases its entire Europe, Middle East and Africa division in Cork, Ireland, a low-tax jurisdiction, and also operates its worldwide sales and distribution network from there. In addition, the company is famous for the large amount of non-repatriated cash it sits on.

This is money which it has earned on foreign sales, and wishes to bring back to the US, but has not yet done so. Like many companies, Apple is hoping for a "repatriation tax holiday", where it can move that income back to the US without having to pay income tax on it. The most recent holiday was in 2004, and saw companies that brought back profits taxed at 5 per cent, instead of 35 per cent. Until Apple decides what to do with those cash holdings, the company is likely to continue deferring tax owed on them.

In addition, the company doesn't have to pay any tax on foreign earnings which are reinvested overseas – it has spent over $5bn this way in the 2012 tax year.

While the 2 per cent paid on international profits may harm Apple's reputation outside the US, the company still pays an effective tax rate of over 25 per cent overall, and provides a breakdown of the deductions that reduce this from the 35 per cent baseline corporation tax rate of the US.

Updated with credit to Sunday Times.

Apple's Headquarters in Cupertino, California. Photograph: Joe Ravi, CC-BY-SA 3.0

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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I dined behind the Houses of Parliament in my sexually connected foursome

My wife and I would sometimes dine out with another couple. We did not always check the significance of the date. 

I am self-employed and find that working from home, setting your own schedule, the days generally blur into each other, with weekends holding no significance, and public holidays, when those who are employed in factories, offices or shops get time off, meaning nothing. I am often surprised to go out and find the streets empty of traffic because it is some national day of observance, such as Christmas, that I wasn’t aware of. I find myself puzzled as to why the shops are suddenly full of Easter eggs or pancake batter.

Growing up in a Communist household, we had a distinct dislike for this kind of manufactured marketing opportunity anyway. I remember the time my mother tried to make me feel guilty because I’d done nothing for her on Mother’s Day and I pointed out that it was she who had told me that Mother’s Day was a cynical creation of the greetings card monopolies and the floral industrial complex.

Valentine’s Day is one of those I never see coming. It’s the one day of the year when even the worst restaurants are completely booked out by couples attempting to enjoy a romantic evening. Even those old-fashioned cafés you’ll find still lurking behind railway stations and serving spaghetti with bread and butter will tell you there’s a waiting list if you leave it late to reserve a table.

In the late 1980s my wife and I would sometimes dine out with another couple, he a writer and she a TV producer. One particular place we liked was a restaurant attached to a 1930s block of flats, near the Houses of Parliament, where the endless corridors were lined with blank doors, behind which you sensed awful things happened. The steel dining room dotted with potted palm trees overlooked a swimming pool, and this seemed terribly sophisticated to us even if it meant all your overpriced food had a vague taste of chlorine.

The four of us booked to eat there on 14 February, not realising the significance of the date. We found at every other table there was a single couple, either staring adoringly into each other’s eyes or squabbling.

As we sat down I noticed we were getting strange looks from our fellow diners. Some were sort of knowing, prompting smiles and winks; others seemed more outraged. The staff, too, were either simpering or frosty. After a while we realised what was going on: it was Valentine’s Day! All the other customers had assumed that we were a sexually connected foursome who had decided to celebrate our innovative relationship by having dinner together on this special date.

For the four of us, the smirking attention set up a strange dynamic: after that night it always felt like we were saying something seedy to each other. “Do you want to get together on Sunday?” I’d say to one of them on the phone, and then find myself blushing. “I’ll see if we can fit it in,” they’d reply, and we would both giggle nervously.

Things became increasingly awkward between us, until in the end we stopped seeing them completely. 

This article first appeared in the 25 May 2017 issue of the New Statesman, Why Islamic State targets Britain

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